This study analyzes the determinants of cash holdings for the accommodation industry in Southern European countries (Spain, Greece, Italy and Portugal) using a sample of 5964 firms during the period 2003-2011. A fixed-effects panel data model revealed that larger companies, higher leveraged, where most debt is short-term and that maintain better relationships with financial institutions exhibit lower cash to assets ratios. Liquid assets substitutes, capital expenditures and asset tangibility also have a negative effect on cash levels. As expected, cash holdings are positively influenced by cash-flow and cash-flow volatility. The results reveal the negative and significant impact of the 2008 financial crisis on cash holdings in the sector, which at the end of 2011 had not yet returned to pre-crisis levels. Empirical results reject the generalized argument put forward, over more than a decade, to explain high cash holdings and its trend to rise until the crisis, emphasizing the little importance of the precautionary motive as an incentive to accumulate cash.

The paper documents an intriguing
development in the emerging world in the 2000s: a decoupling
from the business cycle of advanced countries, combined with
the strengthening of the co-movements in the main emerging
market assets that predates the synchronized sell-off during
the crisis. In addition, the paper tests the hypothesis that
financial globalization, to the extent that it creates a
common, global investor base for emerging markets, could
lead to a tighter asset correlation despite the weaker
economic ties. While an examination of the impact of
alternative financial globalization proxies does not yield
conclusive results, a closer look at global emerging market
equity and bond funds shows that the latter indeed foster
financial recoupling during downturns, reflecting the fact
that they trade near their respective benchmarks and respond
to withdrawals by liquidating holdings across the board.

This paper studies how portfolios with a
global investment scope are allocated internationally using
a unique micro dataset on U.S. equity mutual funds. While
mutual funds have great flexibility to invest globally, they
invest in a surprisingly limited number of stocks, around
100. The number of holdings in stocks and countries from a
given region declines as the investment scope of funds
broadens. This restrictive investment practice has costs. A
mean-variance strategy shows unexploited gains from further
international diversification. Mutual funds investing
globally could achieve better risk-adjusted returns by
broadening their asset allocation, including stocks held by
more specialized funds within the same mutual fund family
(company). This investment pattern is not explained by lack
of information or instruments, transaction costs, or a
better ability of global funds to minimize negative
outcomes. Instead, industry practices related to
organizational factors seem to play an important role.

This paper surveys the academic and
policy debate on the roots of global imbalances, their role
in the inception of the global crisis, and their prospects
in its aftermath. The conventional view holds that global
imbalances result primarily from unsustainably high demand
for goods in the United States and other rich countries, and
that their impending correction must involve major United
States trade adjustment and dollar depreciation -- although
recent literature argues that their extent may be dampened
by financial adjustment effects. In contrast, an alternative
view portrays global imbalances as the equilibrium result of
asymmetries in world asset demand and supply. Absent changes
in the deep determinants of these, global imbalances can
persist. International capital flow patterns before and
during the crisis lend support to the equilibrium view. The
paper also examines different hypotheses proposed in the
literature on the role of global imbalances in the
generation and propagation of the financial crisis. On the
whole...

Emerging economies have tried to promote
long-term debt because it reduces maturity mismatches and
the probability of crises. This paper uses unique evidence
from the leading case of Chile to study to what extent there
is domestic demand for long-term instruments. The authors
analyze monthly asset-level portfolios of Chilean
institutional investors (mutual funds, pension funds, and
insurance companies) and compare their maturity structure to
that of US bond mutual funds. Despite being thought to
invest long term, Chilean asset-management institutions
(mutual and pension funds) hold large amounts of short-term
assets relative to US mutual funds and Chilean insurance
companies. Short-termism is not driven by lack of instrument
availability or tactical behavior. Instead, it seems to be
explained by the desire to minimize inflation risk and, more
importantly, by manager incentives that tilt demand toward
short-term instruments. Extending the maturity of emerging
market debt may require reducing risk and reshaping investor incentives.

This paper uses a rural household survey
dataset collected in 2006 and 2008 to investigate the impact
of a market-based land resettlement project in southern
Malawi. The program provided a conditional cash and land
transfer to poor families to relocate to larger plots of
farm land. The average treatment effect of the program is
estimated using a difference-in-difference matching
technique based on propensity score matching; qualitative
information complement the analysis to ensure unobservable
characteristics do not bias the findings. As expected, the
results show a significant effect on landholdings and
agricultural production, with land size increasing and maize
production increasing by more than 100 kilograms relative to
the control. However, the impacts on food security and
asset holdings were mixed. Households that relocated great
distances had systematically lower impacts than those
households that stayed within their district of origin
because they had to adapt to unfamiliar agro-ecological,
cultural...

This paper studies the relation between
institutional investors and capital market development by
analyzing unique data on monthly asset-level portfolio
allocations of Chilean pension funds between 1995 and 2005.
The results depict pension funds as large and important
institutional investors that tend to hold a large amount of
bank deposits, government paper, and short-term assets; buy
and hold assets in their portfolios without actively trading
them; hold similar portfolios at the asset-class level;
simultaneously buy and sell similar assets; and follow
momentum strategies when trading. Although pension funds may
have contributed to the development of certain primary
markets, these patterns do not seem fully consistent with
the initial expectations that pension funds would be a
dynamic force driving the overall development of capital
markets. The results do not appear to be explained by
regulatory restrictions. Instead, asset illiquidity and
manger incentives might be behind the patterns illustrated
in this paper.

Following the endorsement of the Millennium Development Goals, there is an increasing demand for methods to track poverty regularly. This paper develops an economically intuitive and inexpensive methodology to do so in the absence of regular, comparable data on household consumption. The minimum data requirements for the methodology are the availability of a household budget survey and a series of surveys with a comparable set of asset data also contained in the budget survey. The methodology is illustrated using a series of Demographic Health Surveys from Kenya.

Systematic information on household financial asset holdings in developing countries is very sparse. The author reviews some available data and current policy debates. Although financial asset holdings by households are highly concentrated, deeper financial systems are correlated with improved income distribution. For low-income countries, the relevant question for poor households is not how much financial assets they have, but whether they have any access to financial products at all. Building on and synthesizing disparate data collection efforts by others, the author produces new estimates of access percentages for over 150 countries. Across countries access is negatively correlated with poverty rates, but the correlation is not a robust one: thus the supposed anti-poverty potential of financial access remains econometrically elusive. Despite policy focus on the value of credit instruments, it is deposit products that tend to be the first to be used as prosperity increases, before more sophisticated savings products and borrowing.

This paper studies channels through
which well-known benchmark indexes impact asset allocations
and capital flows across countries. The study uses unique
monthly micro-level data of benchmark compositions and
mutual fund investments during 1996-2012. Benchmarks have
important effects on equity and bond mutual fund portfolios
across funds with different degrees of activism. Benchmarks
explain, on average, around 70 percent of country
allocations and have significant impact even on active
funds. Benchmark effects are important after controlling for
industry, macroeconomic, and country-specific, time-varying
effects. Reverse causality does not drive the results.
Exogenous, pre-announced changes in benchmarks result in
movements in asset allocations mostly when these changes are
implemented (not when announced). By impacting country
allocations, benchmarks affect capital flows across
countries through direct and indirect channels, including
contagion. They explain apparently counterintuitive
movements in capital flows...

Developing countries are trying to
develop long-term financial markets and institutional
investors are expected to play a key role. This paper uses
unique evidence on the universe of institutional investors
from the leading case of Chile to study to what extent
mutual funds, pension funds, and insurance companies hold
and bid for long-term instruments, and which factors affect
their choices. The paper uses monthly asset-level portfolios
to show that, despite the expectations, mutual and pension
funds invest mostly in short-term assets relative to
insurance companies. The significant difference across
maturity structures is not driven by the supply side of debt
or tactical behavior. Instead, it seems to be explained by
manager incentives (related to short-run monitoring and the
liability structure) that, combined with risk factors, tilt
portfolios toward short-term instruments, even when
long-term investing yields higher returns. Thus, the
expansion of large institutional investors does not
necessarily imply longer-term markets.

This paper estimates the effects of peer
benchmarking by institutional investors on asset prices. To
identify trades purely due to peer benchmarking as separate
from those based on fundamentals or private information, the
paper exploits a natural experiment involving a change in a
government imposed underperformance penalty applicable to
Colombian pension funds. This change in regulation is
orthogonal to stock fundamentals and only affects incentives
to track peer portfolios allowing the authors to identify
the component of demand due to peer benchmarking. The
authors find that peer effects among pension fund managers
generate excess in stock return volatility, with stocks
exhibiting short-term abnormal returns followed by returns
reversal in the subsequent quarter. Additionally, peer
benchmarking produces an excess in comovement across stock
returns beyond the correlation implied by fundamentals.

This paper addresses new insights into the predictability of financial returns. In particular, we analyze two aspects of the controversial forecasting literature. On the one hand, we demonstrate a positive and contemporaneous link between aggregate book/market and consumption/wealth ratios. On the other hand, we show that real estate and human capital, as the present value of all future salaries, are key components of the consumption/wealth ratio in Spain. Specifically, we find that the cointegrating residuals of consumption, asset holdings, real estate holdings, and our measure of human capital provide a better forecast of future returns than does the standard proxy of the consumption/wealth ratio. This result is important because it clarifies the importance of country-specific components of wealth for cases in which the consumption/wealth ratio is employed as an instrument in conditional asset pricing models.

With the exception of South Africa,
local financial markets in sub-Saharan Africa remain
underdeveloped and small, with a particular dearth of
financing with maturity terms commensurate with the medium-
to long-term horizons of infrastructure projects. But as
financial market reforms gather momentum, there is growing
awareness of the need to tap local and regional sources.
Drawing on a comprehensive new database constructed for the
purpose of this research, the paper assesses the actual and
potential role of local financial systems for 24 African
countries in financing infrastructure. The paper concludes
that further development and more appropriate regulation of
local institutional investors would help them realize their
potential as financing sources, for which they are better
suited than local banks because their liabilities would
better match the longer terms of infrastructure projects.
There are clear signs of positive change: private pension
providers are emerging in Africa, there is a shift from
defined benefit toward defined contribution plans...

Financial globalization has gathered
attention since the early 1990s because of its
macro-financial implications and growing importance. But
financial globalization has taken shape via different forms
over time. This paper examines two important, concurrent
dimensions of financial globalization: diversification and
offshoring. The diversification dimension refers to the
increase in foreign assets and liabilities in
countries' portfolios. Offshoring is related to the
reallocation of financial activities to international
markets. The former focuses on who holds the assets, the
latter on where transactions take place. The authors find
that globalization via the diversification channel expanded
throughout the world during the 2000s, as domestic residents
invested more abroad and foreigners increased their
investments at home, generating more cross-border holdings.
However, financial globalization via offshoring displays
more mixed patterns, with variations across markets and
countries. The paper also shows that the nature of financing
through both diversification and offshoring has improved for
emerging countries.

International mutual funds are key
contributors to the globalization of financial markets and
one of the main sources of capital flows to emerging
economies. Despite their importance in emerging markets,
little is known about their investment allocation and
strategies. This article provides an overview of mutual fund
activity in emerging markets. It describes their size, asset
allocation, and country allocation and then focuses on their
behavior during crises in emerging markets in the 1990s. It
analyzes data at both the fund-manager and fund-investor
levels. Due to large redemptions and injections, funds'
flows are not stable. Withdrawals from emerging markets
during recent crises were large, which is consistent with
the evidence on financial contagion.

During a financial crisis, credit
provision by international banks may be stymied by three
distinct, but related, channels: changes in lending
standards as a result of increased economic uncertainty,
changes in funding availability from interbank liquidity
markets, and changes in solvency due to effects on bank
balance sheets. This paper illuminates the manner by which
each of these channels independently operated to affect
developed-country bank lending in developing countries
during the global financial crisis of 2007/09. It quantifies
how changes in banks' uncertainty about the value of
their asset holdings, access to interbank liquidity, and
internal balance sheet considerations altered their supply
of credit in the run-up, during, and in the immediate
aftermath of the financial crisis, both in terms of their
relative magnitudes, as well as the sensitivity of these
magnitudes to the crisis.

This dissertation investigates the impact of central banks' asset purchase programs on the economy and the role of frictions in the corporate loan markets. It builds a series of models with trading and information frictions in goods market and credit market. Chapter 1 introduces the main idea in this thesis and presents a review on central banks' asset purchase programs and unconventional monetary policies.
Chapter 2 constructs a model of the monetary economy with multiple nominal assets. Assets differ in terms of the liquidity services they provide. I show that the central bank can control the overall liquidity and welfare of the economy by changing the relative supply of assets. A liquidity trap exists away from the Friedman rule that has a positive real interest rate; the central bank's asset purchase/sale programs may be ineffective in instances of low enough inflation rates. My model also enables me to study the welfare effects of a restriction on trading with government bonds.
Chapter 3 investigates the effects of open-market operations on the distributions of assets and prices. It offers a theoretical framework to incorporate multiple asset holdings in a tractable heterogeneous-agent model. This model features competitive search...

This study analyzes the determinants of cash holdings for the accommodation industry in Southern European countries (Spain, Greece, Italy and Portugal) using a sample of 5964 firms during the period 2003-2011. A fixed-effects panel data model revealed that larger companies, higher leveraged, where most debt is short-term and that maintain better relationships with financial institutions exhibit lower cash to assets ratios. Liquid assets substitutes, capital expenditures and asset tangibility also have a negative effect on cash levels. As expected, cash holdings are positively influenced by cash-flow and cash-flow volatility. The results reveal the negative and significant impact of the 2008 financial crisis on cash holdings in the sector, which at the end of 2011 had not yet returned to pre-crisis levels. Empirical results reject the generalized argument put forward, over more than a decade, to explain high cash holdings and its trend to rise until the crisis, emphasizing the little importance of the precautionary motive as an incentive to accumulate cash.

This paper analyzes environmental
reliance, poverty, and climate vulnerability among more than
7,300 households in forest adjacent communities in 24
developing countries. The data are from the detailed,
quarterly income recording done by the Poverty Environment
Network project. Observed income is combined with predicted
income (based on households’ assets and other
characteristics) to create four categories of households:
income and asset poor (structurally poor), income rich and
asset poor (stochastically non-poor), income poor and asset
rich (stochastically poor), and income and asset rich
(structurally non-poor). The income and asset poor generate
29 percent of their income from environmental resources,
more than the other three categories. The income poor are
more exposed to extreme and variable climate conditions.
They tend to live in dryer (and hotter) villages in the dry
forest zones, in wetter villages in the wet zones, and
experience larger rainfall fluctuations. Among the
self-reported income-generating responses to income shocks...